Executives
Scott Howarth – President and Chief Executive Officer
John Cobb – Chief Financial Officer
Analysts
Jeffrey Schreiner – Capstone Investments
Chris Sigala – B.Reiley & Company
Richard Shannon – Northland Capital Market
Integrated Silicon Solution, Inc. (ISSI) F3Q 2011 Earnings Conference Call July 27, 2011 4:30 PM ET
Operator
Good day ladies and gentlemen and welcome to the ISSI Fiscal Q3 2011 Quarterly Earnings Conference. Just a reminder, today’s call is being recorded.
At this time, I would like to turn the call over to Mr. Scott Howarth, Chief Executive Officer. Please go ahead sir.
Scott Howarth – President and Chief Executive Officer
Good afternoon and welcome to ISSI’s conference call for the quarter ended June 30, 2011. I am Scott Howarth, President and Chief Executive Officer and with me is John Cobb, our Chief Financial Officer.
Before we proceed, I have asked John to comment on the nature of this call and any forward-looking comments that may be made.
John Cobb – Chief Financial Officer
Thanks, Scott, and good afternoon. During the course of this conference call, we will provide financial guidance; make projections, comments and other forward-looking statements regarding future market developments, the future financial performance of the company, new products or other matters. We wish to caution you that such statements are just predictions or opinions and that actual events or results may differ materially due to fluctuations in the marketplace, delays in developing new products, changes in demand or supply, impacts from the events in Japan, or adverse developments in the global economy.
We refer you to the documents ISSI files from time-to-time with the SEC, specifically, our most recent Form 10-K filed in December 2010 and our most recent Form 10-Q filed in May. These documents contain and identify important factors that could cause our actual future results to differ materially from those contained in our financial guidance, projections, comments, or other forward-looking statements.
Scott Howarth – President and Chief Executive Officer
Thank you, John. We are pleased with our overall performance in the June quarter as we once again demonstrated the strength of our high-quality specialty memory focus and our long-term consistent supply relationships with customers. We experienced strong demand across our key targets and achieved another solid quarter profits cash flow and design wins.
Our GAAP net income was $8.1 million or $0.28 per share and our non-GAAP net income was $9.6 million or $0.34 per share. We also achieved $16.8 million in cash flow from operations.
Revenue in the June quarter was $69.8 million, which was at the end of our guidance range and driven by an almost 10% sequential increase in our SRAM and DRAM revenue which totaled $65.3 million. The end contributed $4.5 million in analog revenue, which was slightly lower than expected due to weakness in the Chinese non-branded cell phone market.
As we guided last quarter, we had expected our SRAM and DRAM revenue to be in the range of flat to up 8%. We exceeded these expectations primarily due to our SRAM revenue increasing 16% sequentially as a result of strong demand in the communications market. DRAM revenue grew 6% sequentially driven mainly by demand from our automotive and industrial customers.
Growth in both of these product families reflects continued share gains across our target markets. In terms of our revenue growth by end market, automotive revenue grew 13% from the March quarter and 51% from the year ago quarter. In addition, we saw strong growth in the communications market with 10% sequential growth and 3% year-over-year growth as that market rebounded from an industry correction.
The industrial, medical, and military revenue grew 24% sequentially and 12% from the year ago quarter. As expected, revenue from our low margin consumer memory market decreased 11% from the March quarter and decreased 43% from the year ago quarter. As we discussed in our last conference call, we were concerned about the potential impact of the Japan disaster on our business, but fortunately, we were only minimally affected during the June quarter. However, we continue to closely monitor any supply chain disruptions that may have cause constraints on our customers to obtain components from their suppliers where that may results in a general reduction in demand in the Japanese market. We are most concerned about the potential impact to our automotive business as there are more component shortages limiting automotive or some component shortages limiting automotive production.
We also believe that many customers are being more conservative in their ordering due to general uncertainty in the global economy as a result we remain cautious regarding this situation as we entered the September quarter, but continue to believe these will likely be short-term to disruptions if any.
Now I will briefly review our key markets and products, including DRAM, SRAM and analog. Specialty DRAM represented 59% of our total revenue in the June quarter and increased 3% on a sequential basis, while commodity DRAM represented only 1% of our total revenue giving ISSI almost no exposure to this more volatile memory market.
In terms of specialty DRAM design wins, we had another strong quarter across all of our end markets including numerous large DDR2 design wins for automotive, communications and industrial applications. We also achieve a number of key design wins in the automotive, telecommunications and consumer markets in both BI16 and BI32 configurations.
We are experiencing strong design activity for our new DRAM products including our 256 megabit, 512 megabit and 1 gigabit DDR2, our mobile SD RAM in our 64 megabit and 128 megabit lower power SD RAM KGD product. We expect these new devices to contribute revenue growth in the coming quarters.
In addition, our SD RAM and DDR1 products are seeing more opportunities as some of the large competitors reach end of life on their equivalent products, giving ISSI increased share opportunities. In June we announced a new family of 512 megabit SDR and DDR Mobile DRAMs to provide long-term product support required by extended lifecycle applications in automotive, medical, industrial and mobile communications.
These 1.8 volt devices are available in single data rate and double data rate and in 32Meg x 16 and 16Meg x32 configurations. The operative speed up to 332 megahertz and are targeted for automotive, portable medical, industrial and mobile communication applications.
Additionally we continue to make progress with RLD RAM memory development. We began sampling our RLDRAM 2 memory and expect to begin sampling RLDRAM 3 memory later this quarter. One of our key customers Alcatel-Lucent announced they will be using Micron's RLDRAM 3 to support their 400 gigabit capable chipset and is Micron's only second source for RLDRAM 3, this should also benefit ISSI.
We plan to begin sampling RLDRAM 3 late this quarter and to begin shipping in the first half of 2012. Overall, we continue to see many opportunities for us to expand our market share and grow our specialty DRAM revenue.
Turning to our SRAM revenue, SRAM represented 33% of our total revenue in the June quarter, increasing 16% sequentially and 6% from the year ago quarter. The sequential decrease was primarily the result of stronger demand in the communications market.
During the quarter, we continue to secure strong SRAM design wins in our key markets for various densities of our products including several large design wins with our 4 megabit, 8 megabit and 16 megabit asynchronous products, primarily for automotive, industrial and communication applications and with our synchronous products in communication applications.
We also had several large design wins with our pseudo SRAM devices for automotive and consumer applications. With our continued investment n SRAM, competitive SRAM solutions in long-term lifecycle support, we are confident that we will continue our long-term revenue growth in the SRAM market.
And finally, our analog revenue from Si En was $4.5 million. This was below our expected range of $5 million to $6 million due to softness in the Chinese non-branded cell phone market. As a remainder Si En products include audio power amplifiers, LED drivers for backlighting and panel display, voltage converters and temperature sensors.
Nearly all of Si En’s revenue is from China and its high margin products are sold in mobile communication, digital consumer, networking and automotive markets. We believe this market softness is temporary and are starting to see recovery in demand for China non-branded cell phones and for power amplifier products.
Si En’s gross margin was significantly above the corporate gross margin and their results were accretive to earnings per share. Si En had strong design wins during the June quarter across all of its product lines.
Our integration of the Si En business is progressing as planned. We train our sales force, hire additional design and application engineers and are beginning to introduce our products to our customers in other countries including India, Taiwan and Korea. We see strong opportunities for growth in this market.
Looking our guidance for our fourth fiscal quarter we are expecting total revenue to be in the range of $68 million to $73 million. We continue to see strong growth opportunities and increasing demand in our target markets, but as I mentioned previously we believe our September quarters still has potential risk regarding indirect impact from the events in Japan as well as the weak in uncertain global economy.
Overall our financial performance for the June quarter was at the high end of our expected range and much better than other companies are participated in the DRAM market.
Well, our business will be affected by end-market demand changes and inventory corrections, we believe our focus on high quality specialty products reduces volatility and provide great potential for our growth in revenue and profits as well as higher in most sustainable margins then can be achieved by other DRAM suppliers.
In addition, we believe the advantages of our fabless business model combined with stable end-markets and support for our customers, long product lifecycles further contributes to our opportunity to grow revenue and profits in the future.
Before turning the call over to John, let me briefly provide an update on our fabless manufacturing operations, which also have some effect on the balance sheet. As a reminder, all of our foundries assembly and test suppliers are outside of Japan.
To date, we have had no interruption wafer starts or delivery, nor has there been any impact to assembly in test operations. We will continue to monitor the situation very closely. As we previously discussed, one of our foundries, SMIC, decided to exit the DRAM market and we are transitioning our customers to other foundries over the next several quarters.
In addition, another foundry shutdown their 0.11 micron process, which we were still using. As a result, we made final purchase of both Smick inventory and of the 0.11 micron process inventory to help ensure a smooth, end-of-life transition for our customers. At the end of June, we had $1.6 million in DRAM inventory purchased from Smick, and $3.1 million of the 0.11 micron process inventory. We expect to sell nearly all of the Smick inventory in the September quarter, and the 0.11 micron inventory throughout 2011, 2012.
From a planning standpoint, lead times and foundry and assembly and test are short from a year ago. We have recently purchased testers and made advance payments to foundries to help ensure adequate capacity for certain devices and reduce test costs, and we will continue to make strategic investments to ensure adequate supply of our products. Looking forward to the September quarter, we do not expect wafer or backend capacity to have a significant impact on our business.
Now let me turn it over to John to discuss the numbers, and I will then provide some closing remarks.
John Cobb – Chief Financial Officer
Thank you, Scott. As Scott mentioned, our revenue for the June quarter was $69.8 million, at the high end of our guidance range of $64 million to $70 million. SRAM and DRAM revenue was $65.3 million and analog revenue from Si En was $4.5 million. The SRAM and DRAM revenue increased 9.7% from $59.6 million in the March quarter and was flat with the year ago quarter.
Our revenue in the June quarter by market was 29% communications, 27% automotive, 22% industrial, medical and military, 16% consumer memory and 6% consumer analog. GAAP gross margin was 33.2% in the June quarter, which was at the low end of our guidance range, partially due to the strengthening of the new Taiwan dollar related to the U.S. dollar since most of our backend costs are priced and paid in new Taiwan dollars. This compares to 33.1% in the March quarter and 38.4% in the year-ago quarter.
The non-GAAP gross margin in the June quarter was 33.5%, which excludes purchase price adjustments to Si En’s inventory and the amortization of intangibles recorded in the acquisition of Si En. This compares to 33.7% in the March quarter and 38.4% in the year ago quarter. The June and March gross margins included inventory reserve charges that reduced the gross margins by 140 and 110 basis points in each quarter respectively.
In the year ago quarter, the gross margin included inventory reserve credit, that increased the gross margin by 170 basis points. In addition, the June gross margin was lower by 220 basis points compared to the year ago quarter due to the stronger new Taiwan dollar.
Operating expenses were $15.6 million in the June quarter, which included $400,000 of in-process R&D charges and amortization of intangibles related to the Si En acquisition, compared to $15.4 million in the March quarter, which included Si En for only two months and included $200,000 of amortization of intangibles and $14 million in the year ago quarter. In the June quarter, the company spent more product mass cost compared to both the March quarter and the year ago quarter. In addition, the company incurred $1 million in stock compensation expense in each of the June and March quarters compared to $600,000 in the year ago quarter.
We achieved GAAP operating income of $7.5 million in the June quarter compared to $5.5 million in the March quarter and $13.3 million in the year ago quarter. The non-GAAP operating income in the June quarter was $9.1 million, which excludes stock-based compensation and Si En acquisition items, compared to $7.2 million in the March quarter and $13.9 million in the year ago quarter. Interest and other income in the June quarter was $400,000. We had no gains on sales of investments during the quarter. We also had $300,000 of income from our equity interests in Giantec. In the June 2010 quarter, we had $2.6 million in gains on sales of investments.
GAAP net income for the quarter was $8.1 million or $0.28 per diluted share. This compares to GAAP net income of $5.8 million or $0.20 per share in the March quarter and GAAP net income of $16 million or $0.57 per share in the year ago quarter. Non-GAAP net income was $9.6 million or $0.34 per share. This compares to non-GAAP net income of $7.4 million or $0.26 per share in the March quarter and non-GAAP net income of $16.6 million or $0.59 per share in the year ago quarter. Please refer to our press release and Form-8K for a reconciliation and further explanation of our GAAP to non-GAAP results. Both GAAP and non-GAAP results met our guidance.
On the balance sheet, we ended the quarter with $89.6 in cash and short-term investments, which is an increase of $15.1 million from March. We generated $16.8 million in cash flow from operations in the June quarter. At the end of June, we have $3.34 per share in cash and short-term investments. Our inventories increased by $200,000 from March. The strengthening of the new Taiwan dollar relative to the U.S. dollar since the beginning of our fiscal year has increased our inventory value by $4.2 million. Most of our inventories carried on the books of our Taiwan subsidiary in new Taiwan dollars and the increase resulted from translating the inventory at quarter end into U.S. dollars. This is not impact our income statement, but it does increase the stated inventory value.
As a result of the stronger new Taiwan dollar and the end-of-life transitions Scott mentioned, inventory turns were 3.1 in the June quarter. Excluding the additional end-of-life inventory, we have had 3.3 turns, which is below our goal of four turns, but still healthy for our business in the current environment. Our accounts receivable increased during the quarter by $200,000 and our day sales outstanding were 49 days compared to 53 days in March. We continued to demonstrate the strength of our fabulous business model. Our book value per share has increased 64% in the last two years from $4.73 in June 2009 to $7.75 at the end of June 2011. In addition, our return on equity was 16% in the June quarter, which is higher than many semiconductor companies and we continue to generate strong operating cash flow.
Let me turn to our guidance for the September quarter. In addition to the uncertainty surrounding the supply chain impact from the events in Japan that Scott discussed, there is a high degree of uncertainty in the entire global economy and many companies remained cautious. We expect that overall demand trends in the September quarter will be below typical seasonality. As such, we expect total revenue in the September quarter to range between $68 million and $73 million. This guidance reflects expectation of SRAM and DRAM revenue between $63.5 million and $67.5 million and Si En’s revenue between $4.5 million and $5.5 million.
Gross margin for the September quarter is expected to range between 33% and 34%. We expect DRAM and SRAM pricing to be flat to slightly down sequentially. Operating expenses are expected to range between $16 million and $16.5 million including higher product mask cost compared to the June quarter. As we have previously stated, our product mask cost will fluctuate from quarter-to-quarter. We also expect about $300,000 from interest and other income.
So, taking these factors for the fourth quarter all into account, the company expects GAAP net income to be between $0.22 and $0.27 per diluted share and non-GAAP net income, which excludes stock-based compensation and the amortization of intangibles related to the acquisition of Si En to be between $0.27 and $0.32 per diluted share.
Now, back to Scott for final comments.
Scott Howarth – President and Chief Executive Officer
Thanks, John. As I mentioned in my opening comments over the past few quarters, we have continued to make solid progress on our strategic objectives. We demonstrated the financial benefits of our focus on high-quality specialty memory introduce new products and completed our acquisition of Si En. In addition, as our customers seek table supply and long-term support, we believe we will see future growth through new product introductions and new design wins that are driving market share gains for ISSI.
We continue to work hard to develop product for the future, support our customers, and increase profit from operations. In the month ahead, we’ll continue to focus on our five key objectives, which are number one to grow our customer base and the number of designings; number two, increase our product portfolio while maintaining long-term support in our target markets; number three, to identify and extend our reach into underserved and growing markets; number four, to serve our customers as strategic partners; and number five to remain focused on profitable growth and efficient use for our resources.
We are now poised for growth in future quarters if global economic conditions remain stable. We believe these results show the value of our specialty memory strategy and as we continue to successfully execute on our objectives, we believe we will build an even stronger business. We remain committed to achieving that goal. We’ll take your questions now.
Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Jeff Schreiner, Capstone Investments.
Jeffrey Schreiner – Capstone Investments
Yes, congratulations John and thank you very much for taking my questions. John, the first question I have maybe for you. Understanding there is some lumpiness related to the mask cost and one you do those and plan out new designs in terms of the OpEx raise and sequentially in September, could you help us understand maybe directionally should we see maybe a little bit of a decline in the December quarter for OpEx or is there going to be further mask cost that the company needs to execute?
John Cobb
Well, at this time, we don’t give guidance into the December quarter. As I said in my comments and as we have mentioned before our mask costs are going to fluctuate. So, this year our overall mask cost for the entire year will be probably around $5 million for the fiscal year. Next year, our mask costs are probably going to be higher than the $5 million, because we are going into more advanced technology and so the mask cost are higher, but the actual quarter that we incur the cost will fluctuate. So, it could be lower, it could be higher, but again at this time, we don’t really provide any guidance for December.
Jeffrey Schreiner – Capstone Investments
Could you just as a follow-up?
John Cobb
But I do think in general next year you will see our mask cost be higher than they were this fiscal year.
Jeffrey Schreiner – Capstone Investments
Thank you. That’s very helpful. Just if I could ask maybe in a different way then, if they are $5 million for the full year and we’ve got one quarter left, kind of, where we at in the overall spend there. I mean what maybe less there to spend, I mean, the total cost that we are going to see in the September quarter?
John Cobb
So, the total mask cost for the September quarter probably be somewhere in the range of $1 million to $1.5 million.
Jeffrey Schreiner – Capstone Investments
Okay. Moving on then, I’d just like to ask you John speaking with you real quick, you help to give us some understanding about the inventory and some things are going on, it seems like there is a lot of moving parts in there with the exchange rates and what have you? Just wondering on a thought process here, there seem to be a higher level of work-in-process inventory levels for guys when you are entering the June quarter last time. I am just wondering where you’re kind of working those off this quarter and that you didn’t see a real big pick up in your inventory as you exited June versus the kind of growth you are talking about. And how should we expect inventory to trend exiting September quarter?
Scott Howarth
Well, so our inventory, our SRAM and DRAM revenue actually declined from March to June by about 1.5 million. The end inventory went up a bit. So, our inventory is peaked and we are now bringing the inventory down. So, I think in the September quarter it will probably be somewhat flattish, but as we have commented before I think over the next several quarters we expect our inventory to trend down. We have the issue that Scott went through with the end of life, and then I think just in general our inventory - because we went through the correction a couple of quarters ago was a little higher than we would like, but we will be bringing it down over the next several quarters. But obviously we have to work with the foundries and the back end subcontractors to make that happen.
Jeffrey Schreiner – Capstone Investments
Okay. I’ll ask Scott the last one and then I’ll step off, so some people get some questions. It seems like you had some strength in telco, and given your exposure to telco and some of the commentary you referred some of the larger OEMs. What ISSI’s highest view of spend in the second half related to all kind of equipment?
Scott Howarth
Well, all I can really comment is just on some of the feedback we’ve gotten from our customers. And in the telecom space, communications a lot of our strength has been in base stations. But, overall we certainly saw a pick up this quarter in the communications market. So, I think last quarter there were still a little bit of inventory that was holding it back and we seemed to see a pick up. I can just comment on base station side, we had customers last quarter one that told us who is a large telecom provider that because of the Japan shortage of parts they were not able to meet their backlog during the June quarter, but they expect that they will in the quarter going forward and even in the prior quarter, the March quarter they also had some shortness.
So, I believe though with some of the shortages that we had seen in Japan in the telecom space, the impact to some of our customers they are starting to catch up with it now. So, I think in the second half so far we’re seeing what looks to be a fairly normal healthy communications market.
Jeffrey Schreiner – Capstone Investments
Okay, congratulations again. Thank you, gentlemen.
Operator
Next we’ll take a question from Chris Sigala, B.Reiley & Company.
Chris Sigala – B.Reiley & Company
Hi, thanks for taking my question. How are you guys. Just one quick question, I wanted to see if you can give us an update on the competitive environment within SRAM, just in general that Samsung exiting the business, if you have begun to benefit from that. And overall would you expect that to be more of a gradual process or maybe that was like a catalyst somewhere on the horizon that might accelerate that process? Thanks
Scott Howarth
Sure. Again we are not talking anything that Samsung has officially announced at least. But, in general we know that Samsung is gradually exiting the SRAM market. From our experience they seemed to be focused right now just on their tier 1 customers, continue to support to design win. But, our belief is it’s going to be a gradual decline as no customers will design in their parts now. They will be designing in somebody else, but still there will be lot of the networking and telecom designs wins have fairly long tails. So, I assume that Samsung will probably continue to support again their key accounts for somewhere into the foreseeable future and then there will just be no new design win. So, the remaining players inside that market then will be gradually picking up or starting to pickup already new designs that Samsung no longer fulfill.
Chris Sigala – B.Reiley & Company
Okay, great. And then just looking over at the balance sheet, it’s good to see the cash built so nicely through the quarter. I was just curious what you guys’ general viewpoints are for uses of the cash? How do you tend to look at various alternatives whether it would be acquisitions or share buybacks etcetera?
Scott Howarth
Well, as you can see, we had recently made one acquisition with Si En and we completed in February. So, our first goal with this is – well, I guess the first couple of goals for the cash is we want to just to maintain good stable operations. So, we continue to use some cash to support our manufacturing supply. We’ve been buying some testers, some backend equipment and then also making certain that we get stable supply with our foundry.
Secondly, we want to make certain that we have an opportunity to invest in additional companies or technologies that we feel are synergistic to our business. So, we do keep looking for opportunities to grow strategically. And then third, we have buyback plan in place. The Board sets the price each quarter. So, we will return cash to shareholders if we feel the price is where we think it’s the right point to start to start buying back as well.
Operator
Next up you will hear from Daniel Berenbaum, MKM Partners.
Unidentified Analyst
Hi, this is (indiscernible) for Dan. You mentioned softness in Si En could you provide some more color on that?
Scott Howarth
Yeah, so I China this last quarter, the overall cell phone market – this is for the feature phone, non branded, non ODM phones the demand dropped significantly. So, the weakness we saw there we believe is a one quarter weakness. Actually if we go back to the exact month, it was May and June were quite soft. But, in the cell phone market it is a quite volatile market. So, we can see it drop for one or two months and then come back and we’re just starting to see it coming back again. And this is affecting principally our power amplifier product which I think it was mentioned before we have a very large percentage of that market, close to 70% in the non-branded, non-ODM cell phone market.
Unidentified Analyst
And in terms of margins for Si En how did those do?
John Cobb
Non GAAAP gross margin was over 40%.
Unidentified Analyst
Over 40, and how does that compare to gross margins in your other segments?
John Cobb
That’s our highest. Higher equal to SRM.
Unidentified Analyst
Okay, great. That was actually one of my next questions. And could you talk a little bit more about the RLDRAM trajectory?
John Cobb
Sure. RLDRAM we are sampling our RLDRAM two device now we expect to start working through the design win process which could easily take 9 to 12 months. So we expect that will star to ramp somewhere in the middle of 2012. At the same time we will start sampling RLDRAM 3 this quarter probably by September and we think that will start ramping as well in the first half of 2012 and there we already have commented on one customer Alcatel-Lucent who has been quite aggressive in their 40 gigabit chip set and they will be using Micron’s RLDRAM 3 and also we will be the second source supplier for that. So, we think that will start ramping somewhere toward the later part of the first half of 2012.
Unidentified Analyst
And you’re seeing lot of interest from customers besides Alcatel-Lucent on that.
Scott Howarth
Absolutely. Actually we are seeing significant amount of interest right now for both our RLDRAM 2 product as well as RLDRAM 3. As you probably know, RLDRAM 2 is the main memory that’s being used in some of the networking space in RLDRAM. So, what we are doing there is basically going into existing sockets and getting designed in, so we can be a second source and then the long term supply. This is typically the way our business work. We have designed in and then our customers know that they have insurance policy that will support it long term. And so that’s where we are working on design wins on RLDRAM 2 and then RLDRAM 3 that will be new boxes and systems that will start ramping and shipping cross areas customers in the second half of 2012. Both of those we expect we’ll have fairly long life cycle.
Operator
Anything further ma’am?
Unidentified Analyst
No, that’s it. Thank you.
Operator
Thank you. We’ll now take a question from Rajiv Gill, Needham & Company.
Unidentified Analyst
Hi, guys, this is (indiscernible) calling in for Mr. Gill. Just a couple of questions, in the overall SRAM market how is the level of demand in light of the recent weakness in the communications equipment space? And the RLDRAM, I guess a follow-up question, how should we think about the revenue ramp and associated gross margin?
Scott Howarth
So, let me take the first one. You’re asking about overall SRAM demand?
Unidentified Analyst
Yeah.
Scott Howarth
Yeah, so overall we saw 16% growth quarter-over-quarter, so we clearly saw a pickup. Now it’s a combination of our communication market as well as industrial. We saw a fairly healthy growth in industrial with euro being one of the strongest growth areas for us. In terms of RLDRAM, ramp as I mentioned we’ll start to see initial revenue toward the end of the first half of 2012 and we’ll start to see growth second half 2012, and then growth going into 2013. The margins on that we expect to be somewhere in our overall communications margins probably something in the mid 30s to upper 30s.
Unidentified Analyst
And your India market, any headwind to the Indian market so far?
Scott Howarth
Our Indian market is still a fairly small market overall on the DRAM front, but we are seeing a number of different ODMs that are moving in there, ODMs that are moving in there that are starting to build base stations and telecom equipment for the Indian market. So, we have been seeing a gradual increase in business activity and design win activity India now. So we think that’s going to start showing growth for us in the coming quarters and then we are starting to see quite a bit of interest in some of our Si En products, the analog products both with the audio amplifier for cellphone market as well as some of the LED lighting products going into both cellphone as well as small panel display.
Unidentified Analyst
And when would you expect to see supply uncertainty kind of level out?
Scott Howarth
You said the supply uncertainty?
Unidentified Analyst
Yes, supply uncertainty.
Scott Howarth
What supply uncertainty are you referring to?
Unidentified Analyst
The one in the DRAM and SRAM markets.
Scott Howarth
We’re not seeing any, in our markets we’re not seeing supply uncertainty. There is adequate supply across the markets as far as we can see.
Unidentified Analyst
Okay, actually I apologize. Thanks for taking my question.
Operator
(Operator Instructions) We’ll go next to Richard Shannon, Northland Capital Market.
Richard Shannon – Northland Capital Market
Hi, guys, few questions from me, I apologize I jumped on late, so I might have missed some of your prepared remarks, bear with me. But, if you can detail kind of the moving parts by end market for your June quarter results and then also similarly for your September quarter guidance, how you see those different end markets are moving specifically with, and certainly I loved your comments on the automotive market specifically?
John Cobb
So Richard, this is John. So we’ve had strong growth in our target markets. So automotive we grew 13% sequentially and then the communications market we grew 10% sequentially and they were somewhat recovering from their inventory correction. Industrial, medical, military we grew 24% sequentially, which obviously is very strong and just is a reflection of design wins that we had in the past. And then our consumer memory market declined 11% sequentially, but that’s the lower margin business that we’re deemphasizing. So we saw strong growth in those markets. And for the September quarter as our guidance indicates it’s basically flat to slightly up and I think that’s in general across all the markets. As Scott mentioned we’re a bit cautious especially with the automotive market in terms of the impact from Japan, which there is still some uncertainty about constraints on other component that might affect demand for us and then general weakness in the overall economy. So as we said, I think the overall seasonality might be less positive then what it’s been in the past, but we’re still guiding flat to slightly up for the September quarter.
Richard Shannon – Northland Capital Market
Okay, perfect. Appreciate those thoughts. Second one just to follow-up quickly on RLDRAM. I heard that you response – in response to the previous questions, just want to make sure that the timeframes that you are expecting for your sampling as well as your customer introductions in consumption of your product at least not worse than the timeframe you have been expecting last quarter?
John Cobb
Yeah, there have been no changes. We are sampling – we started sampling RLDRAM 2 in June quarter. We are going to keep continue sampling it and we expect we’ll sample RLDRAM 3 later this quarter. I think we’ll have samples towards early September. The design cycle for those typically for some of the networking space can be anywhere from 9 months to 12 months. So that’s why we’d expect to see revenue about a year away. With the one exception we do know of today is Alcatel-Lucent who is trying to move fairly aggressive on their new router with the 400-gig chipset and trying to increase that. So, we think they will start shipping probably the first revenue customer in the first part – last first part of the first half of the year – next year.
Richard Shannon – Northland Capital Market
Okay, perfect.
John Cobb
So, none of that has changed since we talked last quarter.
Richard Shannon – Northland Capital Market
Okay. I just wanted to make sure it sound like – but just want to make sure. Third question on OpEx for the quarter several hundred thousand higher than last quarter; I’m assuming this is related to mask costs if not is what’s the reason for the increase there?
John Cobb
Actually, the main driver on it is Si En. So, if you remember in the March quarter we had Si En for two months, where in June we have them for three. And then also as part of the acquisition accounting, we took an R&D charge in-process R&D charge related to Si En. The way the accounting works now is you allocate part of your purchase price to in-process technology, capitalize it. And then, if you decide to cancel one of the projects then you basically write off the amount that you capitalized. So, there was a project that Si En decided not to continue to pursue, so there was a charge of about $145,000. So, that’s – and then obviously there is some plusses and minuses, but that the main difference.
Richard Shannon – Northland Capital Market
Okay. So, John you referring to what happened in the June quarter or what’s your guidance was for September, because I was asking about September?
John Cobb
Oh, I’m sorry, I was talking about June. September is almost tall mask costs.
Richard Shannon – Northland Capital Market
Okay, perfect. That’s what I thought. And then just last question for me in terms of pricing out there for wafers in products, what’s been the general trend that will last three months beneficial or headwind in anyway, in anyway you can differentiate between DRAM and SRAM, it will be interesting to know? Thanks.
Scott Howarth
Yeah. We’ve actually seen utilization or foundries have declined. So, we have seen favorable wafer pricing for both SRAM as well as DRAM. And we have tried to do more of a longer term purchase, so we can get volume discount pricing, so that we can try to manage our costs and improve our margins going forward.
Richard Shannon – Northland Capital Market
Okay, perfect. And John do you have target for cash any of the quarter some sort of quantitative boggy or at least directionally?
Scott Howarth
Target for cash.
Richard Shannon – Northland Capital Market
Yeah. Where you think finish cash in the September quarter.
John Cobb
Oh, in September quarter, I would expect to generate cash in the September quarter probably not as much as we didn’t June, but maybe in a range of $5 million to $10 million.
Richard Shannon – Northland Capital Market
Okay, perfect. Thanks a lot guys.
Scott Howarth
Great, thanks Richard.
Operator
Next up, we’ll take a question from (indiscernible) Asset Management.
Unidentified Analyst
Good afternoon, gentlemen. I wonder if you could describe to as why you have a special election to add options to your pool and why that ended up being the special election?
Scott Howarth
Sure. We had early election when we did proxy for Annual Meeting back in February. We had a larger number and our shareholders didn’t approve that. So, we went out with a smaller offering and request for 2 million shares to basically fund our stock option tool and that was approved by the shareholders with this special election. As we do every year, we do (indiscernible) stock options to all of our employees so we can manage our overall expenses and include long term retention opportunities for our employees. So, it is an important part of our overall compensation operational plan.
Unidentified Analyst
What’s your goal in terms of the amount of money that you expect to spend on that option program every year?
Scott Howarth
We don’t have a goal. We typically look at just a burn rate that we manage to. And what we’ve been following is typically ISSI guidelines for companies in our business in our area and that’s what we’ve been trying to stick to.
Unidentified Analyst
Okay.
Scott Howarth
Thank you.
Operator
Next we will go to Jeffrey Schreiner, Capstone Investments.
Jeffrey Schreiner – Capstone Investments
Hey guys just two quick follow-ups if I may. Scott, how are bookings through the quarter. Could you help us with that, is that sort of linear or was there any change end of the quarter?
Scott Howarth
You’re referring to June quarter?
Jeffrey Schreiner – Capstone Investments
Yes, I apologize, yes.
Scott Howarth
Actually it was a good healthy quarter. We started with fairly strong backlog during the June quarter and we just saw good linear bookings throughout the quarter. In many occasion you might have one week or the next week might have a spike up or down, but overall it was pretty steady and we also entered this quarter with what we consider is a fairly healthy backlog as well.
Jeffrey Schreiner – Capstone Investments
Would you say it’s similar to what you started June with?
Scott Howarth
Yes, very similar. I think part of it we’re starting to see gradually converting a lot of our customers away from more turns business to where they want to make certain they have backlog in place in the future quarters. So, even today we continue to see backlog now in to the December quarter and we already starting to see backlog into the March quarter of 2012.
Jeffrey Schreiner – Capstone Investments
So, lead times are they expanding somewhat then for your customers, because you’re shifting business or is that?
Scott Howarth
No. They’re not expanding in fact we’ve held our lead times constant, even on some cases especially with the Japan problems we had a number of our competitors that had to extend lead times. Actually inventory we came real asset for us as we have the inventory in place, which allowed us to get additional business.
Jeffrey Schreiner – Capstone Investments
Okay. The final question from me is, I touched on with you and I think there was the question earlier about the benefit you may see from disruption in the SRAM market. And I was wondering if you could help us to understand kind of where you guys are right now for a higher density, high-speed product is that really the opportunity some would say in the marketplace and where a lot of disruption is happening. Wondering maybe one percentage of your shipments in SRAM could be high-speed next calendar year end? What were they if you may in the June quarter?
John Cobb
So, as I commented before you referring really to mostly like the QDR, SRAM, high speed 72 meg
Jeffrey Schreiner – Capstone Investments
72 or higher, yeah.
John Cobb
Yes. As I said before our product offering is not as competitive as some of the others. So, we really have not been able to pick up much of a share in the high performance QDR market. So, our revenue is small. We’re designing in tune devices though that one is the 136 meg, they will be sampling soon and then we’ll have 72 meg that we expect to be sampling toward the end of the year. That we think will then be quite competitive allowing us to start picking up business what we would expect revenue wise probably by the second half of 2010.
Jeffrey Schreiner – Capstone Investments
Okay. Thank you very much.
John Cobb
Sure. Thank you.
Operator
At this time there are no further questions. I will turn the conference back over to our speakers for any additional or closing remarks.
Scott Howarth – President and Chief Executive Officer
Well, thank you for participating in this call. We plan to participate in three upcoming investor conferences. We will present at the WJB Tech Gateway in Chicago on August 16th at the (indiscernible) and Brothers Annual Investor Conference in New York on September 7th and at the Citigroup Global Tech Conference in New York on September 8th. We hope to see you at these events. Have a good evening.
Operator
Ladies and gentlemen, that does conclude today’s conference. Thank you all for your participation.
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